In 1996, two parties, Grigsby & Associates (Grigsby) and M Securities Investment (M) agreed to underwrite a $183 million municipal bond offering in Dade County, Florida. GBR Financial Products failed to pay Grigsby, so Grigsby didn't pay M. Lots of lawsuits followed. In 2006 M initiated an arbitration proceeding against Grigsby seeking $2 million in damages, the amount allegedly owed to M for its role in the bond offering. Grigsby then brought an action in the federal district court claiming that M had waived its right to arbitration and therefore should be enjoined. The arbitration proceeded, and M won an award of $100,000, plus interest and attorneys' fees, and Grigsby was sanctioned $10,000 for failing to comply with discovery obligations.

Grigsby challenged that award in federal court, but the district court confirmed the award. Grigsby then appealed to the 11th Circuit. Last week, the 11th Circuit issued its opinion, Grigsby & Associates Inc. v. M Securities Investment. Before the district court, Grigsby had argued that the arbitration was barred by res judicata and because M had waived the right to arbitrate by filing several lawsuits against Grigsby before initiating arbitration proceedings.

The 11th Circuit agreed with the district court that the res judicata issue is in the category of "disputes over whether a particular claim may be successfully litigated anywhere at all," and that such disputes are presumptively assigned to the arbitrator. Grigsby's waiver claim would seem to be in the same category, since in Howsam v. Dean Witter Reynolds, Inc., 123 S. Ct. 588 (2002), the U.S. Supreme Court included "allegations of waiver" on the list of issues presumptively for the arbitrator. The 1st, 3rd, and 6th Circuits have nonetheless treated waiver as issue presumptively to be decided by the courts rather than by arbitrators when the waiver is based on a party's conduct. The 11th Circuit decided to follow the reasoning of these Circuits. The district court's failure to decide the issue of waiver was legal error and therefore an abuse of discretion.

The case was remanded to the district court to decide Grigsby's waiver claim on the merits. Until it does so, the 11th Circuit vacated the district court's order denying an injunction of the arbitration award, subject to reinstatement if the district court determines that no waiver occurred.

Plaintiff Alan Vitt’s laptop "crapped out" (term of art) just after the 1-year warranty expired. The crux of his complaint on behalf of all purchasers of the iBook G4: the laptop did not last “at least a couple of years,” which he allaged is the reasonable consumer expectation of a laptop. He alleged that “this is because one of the solder joints on the logic board of the iBook G4 degrades slightly each time the computer is turned on and off, eventually causing the joint to break and the computer to stop working shortly after Apple’s one year express warranty has expired.” Plaintiff further alleged that Apple “affirmatively misrepresented the durability, portability, and quality of the iBook G4 and did not disclose the alleged defect.”

Vitt challenges Apple’s advertising because it stated that the iBook G4 is “mobile,” “durable,” “portable,” “rugged,” “built to withstand reasonable shock,” “reliable,” “high performance,” “high value,” an “affordable choice,” and an “ideal student laptop.” The district court held that these statements are generalized, non-actionable puffery because they are “inherently vague and generalized terms” and “not factual representations that a given standard has been met.” We agree. Even when viewed in the advertising context as Vitt urges, these statements do not claim or imply that the iBook G4’s useful life will extend for “at least a couple of years.” For example, to the extent that “durable” is a statement of fact it may imply in context that the iBook G4 is resistant to problems occurring because of its being dropped, but not that it will last for a duration beyond its expressed warranty.

If you are attending next week's AALS Annual Meeting, please join us for the Contract Section's program, New Voices in Contracts Scholarship, scheduled for Saturday, January 7, 2012, from 1:30 to 3:15 p.m., at the Marriott Wardman Park Hotel. The program will feature three junior scholars whose proposals the selection committee chose from the many quality responses to our CFP.